I.
HIGH COURT
5. [2020 116 taxmann.com 36 (Guj.)]
Anopsinh Kiritsinh Sarvaiya vs. State of Gujarat
Date of order: 6th February, 2020
When tax authorities have reason
to believe that the goods liable for confiscation on the ground of
contravention of law or any document or material useful for any proceeding is
secreted at any place (godown), the right course of action is to seize and
confiscate the goods and proceed against the owners of the goods and not to
seal the godown indefinitely to prejudice the owner of the godown
FACTS
The petitioner had given his
godown on rent to five parties to store agricultural produce. The State Tax
authorities visited the godown and in the exercise of power u/s 67 of the Act,
placed their seal on the godown based on the information that the five dealers,
jointly in occupation of the godown and who had stored their goods in it, had
contravened the provisions of the Act and the Rules. The Sealing Memo recorded
reasons like availing wrong Input Tax Credit, collecting tax wrongly and not
depositing it with the government, neglecting the search team and non-co-operation
in the process, etc. The petitioner moved Court seeking relief against the
action of the state’s officers and release of the godown.
HELD
The Court noted that section 67
empowers the proper officer to cause search at any place and seize the goods,
documents or books or things if he has reasons to believe that any goods liable
to confiscation, or any documents or books useful or relevant to any
proceedings are secreted at such place. Accordingly, it was held that if it is
the case of the Department that the five dealers have stored goods or other
articles which are liable to confiscation, then the authorities could have
seized such goods and documents a long time back and once the goods and other
articles were seized from the premises then there could be no good reason to
keep the godown in a sealed condition. The Court, therefore, issued directions
to remove the seal and proceed against the dealer/s.
6. [2020
(32) GSTL 338 (All.)]
Ice Cream Manufacturers Association vs.
Union of India
Date
of order: 24th October, 2019
Classification of ice creams at
par with pan masala and tobacco products for composition scheme under
GST is not without any rationale and, therefore, is not arbitrary or
unreasonable or irrational
FACTS
The present writ petition is
filed against composition scheme notifications (Notification No. 08 of 2017-C.T.
dated 27th July, 2017 and No. 14 of 2019-C.T. dated 7th March,
2019) stating that ice cream cannot be treated at par with pan masala
and tobacco products as consumption of ice cream does not have ill-effects. It
leads to heavy taxation without any reasonable classification thereby making
such treatment unjust, unreasonable and violative of Article 14 of the
Constitution of India.
HELD
Relying upon the ratios
laid down by the Hon’ble Supreme Court in various cases, the Court listed the
principle that there is always presumption in favour of the constitutionality
of a law. No enactment can be struck down by just saying that it is arbitrary,
unreasonable or irrational; the Court is not concerned with the wisdom or
non-wisdom, the justice or injustice of the law; hardship is not relevant for
the constitutional validity of a fiscal statue or economic law. In the field of
taxation, the legislature enjoys greater latitude for classification. Thus, it
was held that such classification of ice creams was not without any rationale
and, consequently, the writ petition filed by the petitioner was dismissed.
II.
APPELLATE AUTHORITY
7. [2020
114 taxmann.com 453 (AA-GST-HP)]
Godrej
Consumer Products Ltd. vs. ACST & E-cum Proper Officer Circle, Baddi
Date
of order: 11th February, 2020
While preparing E-way bill, the
supplier keyed in the wrong distance which reduced the validity of E-way bill
and caused it to expire while the goods were in transit. The appellant
authority, relying upon other documents accompanying the consignment, granted
relief from additional tax demand holding that benefit of CBEC Circular No.
64/38/2018-GST dated 14th September, 2018 and the State Circular No.
12-25/2018-19-EXN dated 13th March, 2019 be granted to the appellant
as the error is minor in nature
FACTS
The appellant had placed an order
on the supplier for the supply of certain goods from Puducherry to Himachal
Pradesh. The supplier issued a valid invoice and also generated the E-way bill
online and handed over the goods to the transporter for transportation. When
the consignment was intercepted, the authorities noticed that the E-way bill
had expired. Consequently, the Department passed a detention order and seized
the goods along with the vehicle. The appellant representative attended in
person before the authority and explained that the consignment was accompanied
with proper invoices along with the E-way bill; however, due to a typographical
error while generating the E-way bill, it had mentioned an approximate distance
of 20 km. instead of 2,000 km. As a
result, the validity of the E-way bill is perfectly correct and consistent with
the invoice and the consignment. However, the Department did not appreciate the
fact and demanded a penalty.
HELD
The appellate authority noted
that there is no dispute as regards the quantity of the goods, tax invoice and
the E-way bill issued by the supplier which is legally required to be carried
along with the truck. Further, the E-way bill contained all the required
information in Part A as well as Part B as prescribed under E-way bill rules.
Thus, the appellant’s truck was carrying all the legal documents including the
E-way bill, and the said bill duly contained all the information which had to
be filled under Rule 138 of CGST/HPGST Rule 2017; however, due to a
typographical error, the approximate distance was mentioned as 20 km. instead
of 2,000 km. Owing to the said error, the validity of the E-way bill got
generated for only one day and expired before the goods reached the
destination.
The appellant authority referred
to paragraph 5 of the CBEC Circular 64/38/2018-GST dated 14th
September, 2018 and the decision of Sabitha Riyaz vs. the Union of India
[WP (C) 34874 of 2018] and [2018 (11) TMI 213 – Kerala High Court] in
which it was held that ?if the error in E-way bill is minor apart from being
typographical, then it stands covered and exempted under the Circular No.
64/38/2018-GST, dated 14th September, 2018’. The appellant authority
also observed that as per paragraph 6 of the said Circular in case of minor
errors mentioned in paragraph 5, penalty to the tune of Rs. 500 each u/s 125 of
the CGST Act and the respective state GST Act should be imposed (Rs. 1,000
under the IGST Act) in Form GST DRC-07
for every consignment. The appellate authority accordingly directed the refund
of additional demand and imposed a nominal penalty as per the said Circular.
III.
AUTHORITY OF ADVANCE RULING
8. [2020-TIOL-64-AAR-GST]
Clay
Craft India Pvt. Ltd. [AAR-Rajasthan]
Date
of order: 26th February, 2020
Services provided by directors of
company are liable to GST under reverse charge
FACTS
The applicant informed that its
Board of directors was performing all
the duties and responsibilities as required under the law and the directors
were working as employees for which they were being compensated by way of
regular salary and other allowances as per company policy and as per their
employment contract. They are also deducting TDS on their salary and applying
the PF laws. A ruling is sought as to whether GST is payable under RCM in
respect of the salary paid to the directors of the company and whether the
situation would change if the director is also a part-time director in another
company.
HELD
The authority primarily noted
point No. 6 of Notification No. 13/2017-Central Tax (Rate) and held that it is
very clear that the services rendered by the directors to the company for which
consideration is paid to them under ‘any head’ is liable to GST under reverse
charge mechanism. Moreover, it was noted that consideration paid to the
directors is against the supply of services provided by them to the applicant
company and are not covered under Clause (1) of Schedule III of the CGST Act,
2017 as directors are not employees of the company. Further, it was held that
the situation remains the same in the second situation as well and the company
is liable to GST under reverse charge.
Note: The
decision states that there cannot exist an employer-employee relationship in
case of services provided by directors and it will be liable to GST under
reverse charge. The decision appears to be controversial considering the
relevant provisions of the Companies Act, 2013 in this regard. The decision is
likely to be appealed against. The readers are advised to refer to the decision
in the case of Allied Blenders and Distillers Private Ltd. [2019 (24)
GSTL 207 (Trib.-Mum.)] which is in favour of the assessee in the
service tax regime.
9. [2020-TIOL-66-AAR-GST]
M/s
Latest Developers Advisory Ltd. [AAR-Rajasthan]
Date
of order: 9th January, 2020
Supply of maintenance services
and supply of water even though through different contracts by a resident
welfare association are directly related to each other
FACTS
The applicant enters into an
agreement with society / owners’ association / individual customers for
maintenance services for common area maintenance (CAM) and levies GST for providing such services. In
another area which lacks proper water supply, the applicant would be entering
into a contract (Contract-II) with individual members for supply of water for
personal use and for which purpose they would be sourcing the same through
tanker water suppliers; in the absence of any meters, water charges may be
collected based on square foot area occupied by such customers and an invoice
would be issued accordingly. A ruling is sought to know as to whether they
would be required to pay GST on water charges so collected from the customers
under Contract-II; and whether exemption would be available as prescribed in S.
No. 99 [Water – Heading 2201] of 02/2017-Central Tax (Rate).
HELD
The authority noted that the
applicant is involved in two agreements where Contract-I is for maintenance
services provided to the residents’ welfare association (RWA) and Contract-II
is for supply of water to individuals residing in the RWA. GST on services
provided to its resident members is @18% when each unit household in the society
pays more than Rs. 7,500 per month. The authority observed that the applicant
seems to have bifurcated the services provided to the society in order to
escape the condition of Rs. 7,500 per month per member or it might be crossing
the GST registration threshold limit of Rs. 20 lakhs.
It was noted that as a general
practice the maintenance services are inclusive of supply of water and hence
supply of water provided through a separate agreement raises a suspicion. Even
though the applicant may have a separate agreement for supply of water and for
receiving charges on the basis of square foot occupancy, it is not possible to
supply water to each apartment separately as mentioned in Contract-II because
the apartments do not have their own separate water storage tanks. Thus, both
contracts appear to be directly linked to each other as there is no case of
direct supply of water by the applicant to individual residents of the society;
therefore, the applicant is required to pay the GST as applicable on Contract-I.
10. [2020
116 taxmann.com 102]
Hitachi
Power Europe GmbH (AAR-Uttar Pradesh)
Date
of order: 11th September, 2019
A project office of a foreign
company in India is a mere extension of the head office. Further, expat
employees of the foreign company working through project office are also the
employees of the project office and any accounting entry passed in the books of
a project office for salary paid to such expat employees out of funds of a
foreign company would not attract GST. And further the services provided by
expat employees to the project office would not attract GST due to
employer-employee relationship
FACTS
The applicant
is a German company and has been awarded contracts for the supply of goods and
supervisory services in relation to certain mega power projects in India. The
applicant constituted three project offices for undertaking an onshore portion
of the project in India. For carrying out the projects in India, the expat
employees (employees of the head office) would work out from the project office
in India. As the project office is not a separate legal entity and merely an
extension of the head office in India, these expat employees are employees of
the project office. The question raised by the applicant was whether GST is
applicable to the accounting entry made for the purpose of Indian accounting
requirements in the books of accounts of the project office for the salary cost
of the expat employees.
HELD
The AAR noted
that the PAN and TAN for the project office have been issued by the Income-tax
Department in the name of the foreign company. Further, the applicant has
obtained registration under the Companies Act, 2013 as a ‘Foreign Company’ by
mentioning its name as ‘Hitachi Power Europe GmbH’. Besides, the parties in
India have entered into an agreement with the foreign company and, in turn, as
per RBI guidelines, the foreign company has opened its project office in India
to undertake / complete the contractual obligations. It was also observed that
as per the FEMA regulations any shortfall of funds for meeting any liability in
India will be met by inward remittance from abroad and the project will be
funded directly by such inward remittance. AAR also verified the same from the
financial statements of the project office.
Based on the same,
the AAR held that the project office is merely an extension of the foreign
company in India to undertake the project in India and limited to undertaking
compliances required under various tax and regulatory requirements in India;
and hence the transactions between the foreign company and the project office
are an intra-company affair. The AAR further held that the project office is
treating the expat employees as its own employees in various regulatory / tax
matters and an ‘employee-employer relation exists between the project office
and the expat employees’. The AAR also relied upon Schedule III which provides
that the services by an employee to the employer in the course of or in
relation to his employment shall be treated neither as a supply of goods nor a
supply of service. Accordingly, the AAR held that the service provided by the
expat employees to the project office falls under the category of ‘Services by
an employee to the employer in the course of or in relation to his employment’.
Accordingly, no GST is leviable on the salary paid to the expat employees and
reflected in the books of accounts of the project office.
11. [2020 (32) GSTL 435]
KSR & Company (AAR-Andhra Pradesh)
Date of order: 14th February, 2019
Input Tax
Credit restriction under sections 17(5)(c) and 17(5)(d) will not apply on goods
and services used in execution of works contract for construction of road
FACTS
The applicant
is supplying works contract services of construction of road to the government
of Andhra Pradesh to make special repairs to feeder road wherein the scope of
work includes construction of granular sub-base by providing HBG material and
spreading uniform layers with motor grader or by other approved means. Advance
ruling is sought on whether they are eligible for Input Tax Credit on GST paid
on goods or services in execution of ‘Works Contracts’ specifically in
construction of roads for the government.
HELD
Concurring
with the applicant, the Authority of Advance Ruling held that as per section
17(5)(c) of the CGST Act, 2017 since the applicant is in the same line of
business, i.e., works contract services, Input Tax Credit is allowed on goods
and services used for providing works contract services. The authority opined
that the work executed by the applicant is for the state of Andhra Pradesh and
not for themselves and, thus, not ineligible even as per section 17(5)(d) of
the CGST Act, 2017.
IV. APPELLATE AUTHORITY OF ADVANCE RULING
12. [2020
(32) GSTL 751]
Specsmakers
Pvt. Ltd. (App. AAR Tamil Nadu)
Date
of order: 13th November, 2019
Provisos to Rule
28 need not be applied seriatim. Second proviso to Rule 28 is not
subordinate to first proviso to Rule 28 of the Central Goods and
Services Tax Rules, 2017
FACTS
The appellant is in the business
of spectacle frames, sun-glass lenses, etc. and procures raw material locally
and by way of imports. His main office is located in Tamil Nadu and he has
branches in various other states to which he transfers the materials so
procured. In order to determine the valuation in such transfer cases, the
appellant had sought advance ruling whereby it was decided that the value of
supply shall be open market value as per Rule 28(a) of the Central Goods and
Services Tax Rules, 2017 rejecting the appellant’s contention of applicability
of the second proviso to Rule 28(a). It was specifically observed by the
advance ruling authority that both the provisos to Rule 28 shall be read
together. Aggrieved by the above, the present appeal was filed by the
appellant.
HELD
The
Appellate Authority of Advance Ruling observed that when an ‘open market value’
is available, sub-rules (b) and (c) of Rule 28 of the Rules may not be
applicable but the same is not the case with the provisos to Rule 28. Considering
the construction of Rule 28, the Appellate Authority of Advance Ruling held
that the law provides the taxpayer with an option to adopt 90% of the price
charged as value to be adopted initially (i.e., supply between distinct
persons) and, in the alternative, in case full ITC is available to the
recipient as credit, the value declared in the invoice is deemed as ‘open
market value’. The second proviso is not subordinate to the first, but
is independently operative. Applying the above to the specific facts and
circumstances of the case at hand, the Appellate Authority of Advance Ruling
held that the Appellant may adopt the value for supply to distinct person as
per the second proviso to Rule 28.
